What To Know Ahead Of India's Election

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:16)

Tracy, remember, I think it was just last week's episode, and I was saying, for however much we talk about it, I really feel like I have no understanding of what's going on in the Chinese economy.

Tracy Alloway (0:31)

Yes, it was just last week's episode, and I think you're not alone in that sentiment. I think a lot of people who are actually actively involved in that market are probably just as confused as you are.

Joe Weisenthal (0:42)

And I remain confused, although I did learn a bit after last week's episode. Well, you know, there's another gigantic economy, and after thinking about it this morning, it's also really huge, and I probably even know less about this economy than China's.

Tracy Alloway (0:59)

Wait, an economy almost as big, you said?

Joe Weisenthal (1:03)

Yeah, well, it's not China, and it's obviously not the US. So what's another really huge country?

Tracy Alloway (1:10)

It has to be India, right?

Joe Weisenthal (1:12)

Right, here's another country with a billion people, huge emerging market, and when I think about it, I realize, wow, I even know less about how the Indian economy functions and the state of the Indian economy right now than China's.

Tracy Alloway (1:27)

Yeah, and obviously India is, well, it's a big economy. It's also a fast-growing economy relative to a lot of others out there in the world, but it's also kind of unique in many ways. And whenever I think about India, one of the things that always springs to mind is the uniqueness of its market. Like, it's still a very closed-off market in many, many ways.

Joe Weisenthal (1:48)

Do you mean financial markets specifically?

Tracy Alloway (1:51)

Financial markets, yes. I should be clear.

Joe Weisenthal (1:53)

Right. So I think not a lot of people talk about it, not a lot of people discuss it. Certainly it doesn't get as much attention in China, and perhaps for good reason, but I think it's an important time to be talking about it more, as you mentioned, it's growing rapidly. There's also an election coming up this year.

So I think it's time that we had an India episode.

Tracy Alloway (2:17)

I'm excited. I'm actually really, really interested in the upcoming India elections. They haven't, the dates haven't actually been announced yet, but they could be announced basically any day after we publish this episode, because we are recording the day before India is also due to release its latest government budget. And this is like the big set piece from the current administration, the Modi government, the nationalist government.

And it's gonna be really interesting to see what they do, whether they pull out all the stops to try to win support ahead of the election.

Joe Weisenthal (2:52)

So in light of all of this news that's about to happen, I think we should get started. Today we have two guests, two very smart commenters on all things, Macro, and they know a lot about India, Mayank Saxarya of Macro Risk Advisors, and Srinivas Thiruvananthi of the Jerome Levy Forecasting Center.

Both of them joining us here in studio to talk about the election and the economy and the markets. And thank you both for coming in.

Srinivas Thiruvananthi (3:21)

Thank you, Joe. Thank you, Tracy.

Mayank Saxarya (3:23)

Thanks, guys.

Joe Weisenthal (3:24)

So let's get started. First, let's talk about the election. It's coming up, as Tracy mentioned, we don't know the exact dates, but both of you and Srinivas, you can start first. What are you going to be watching for in this election?

Srinivas Thiruvananthi (3:38)

Well, I mean, it all comes down to the economy. As James Carville famously said, it's the economy, stupid. And curiously, all the discussion in India is not much about the economy. It's all about combinations, caste politics and all that stuff. It rarely is about the economy, but I actually look back into the history of the last 11 elections, and I looked at just simple prediction, using a simple model of how GDP has done during the term of the income and government compared to the previous five years.

And that has predicted nine out of the 11 elections.

It is the economy, stupid. And I think Indian electorate is not given enough credit. They are actually pretty savvy in that regard.

Mayank Saxarya (4:24)

I think that's exactly right.

The participation rate in India for elections is in the 60s, much higher than say most 12 markets. And that has trended higher over time.

And the sort of incumbency, anti-incumbency that Srinivas mentioned has become more correlated with economic outcomes than social or religious related outcomes than it used to be in the past. So in many ways, I sort of see this as a maturation of the Indian electorate. It's very easy to forget sometimes that the country is not even 70 years old, basically starting in 1947 So it's a very, very young country.